Common-sense ideas to grow your advisory business

It is sometimes good to step back from the day to day and look at the trends and innovations that are changing our industry and others. Today, I’d like to introduce you to some broad-based research that our Investment Manager Services team recently released. (Note: One of the benefits of working as part of a global corporation like SEI is that advisors can leverage the excellent research of our entire organization.)

The research examines 5 transformative trends and applies them to the landscape of the entire asset management industry. I’d like to introduce you to some of the findings, and apply them to the advisor market.

The speed of change, especially in technology, is a cause for concern to most of advisors. Our focus is on our clients, and how we can advise them through all the decisions that must be made to help clients build a rosy financial future. Who has time to keep in touch with all the latest changes, especially when they may flare up and fade so quickly?

I’ll give you an example. Have you been caught up in the Pokémon Go craze? It went from nothing to a world phenomenon in under five days! But after this summer, will it still be around? Maybe not, but I am sure that the new ideas it brings to the augmented reality genre are going to pop up in many new applications and in business software, as well.

Back to the paper. Our research categorizes the innovation trends in asset management into:

Watsonization
Watsonization can be summarized as the ability for a computer to appear and act like a human. The best-known example is the IBM computer “Watson,” which has been used to play (and win at) Jeopardy! and play (and win at) chess with a version of the computer called “Deep Blue.” IBM has continued developing these capabilities in its IBM Watson Group.

Watsonization has a direct impact on advisors. IBM is partnering with different financial institutions to see how Watson can emulate an advisor. Robo-advisors have carved out a small market for self-directed investors who want basic asset management. The robos have struggled with the next phase, which is to use technology to give advice.

An advisor’s key talent is building trust with their clients and then persuading them to make sound financial decisions. Persuading a human to make a decision is not easy. Can technology? Or does it just inform the process? The jury is out, but probably the best approach is for the technology to interact and “feel” like a human. Hopefully, they turn out better than HAL. My favorite HAL quote is, “I’m sorry, Dave. I’m afraid I can’t do that.” (The filmmakers were way ahead of their time at foreseeing the DOL rule!)

Googlization
Google and other search companies have fundamentally changed the way we access information. When I was growing up, my Dad had a way of winning an argument by saying, “The stats show that X% of people do Y.” Note “the stats,” with no attribution. Even as a youngster, I doubted his memory for numbers. Today, he would have no chance. The iPhone would be out and a Google search would reveal the real stats.

Search information can be married with “big data,” allowing multiple data types to be analyzed and presented in meaningful ways. For advisors, the obvious first example of this is aggregation. All of a client’s data can be brought into one place, allowing an advisor to offer clients a holistic view of their assets.

The next step is that the data can be analyzed and used to provide new services. Some are exciting; some are concerning. For instance:

Mortgage data can be mined, and an advisor can proactively notify clients of better mortgage offers

Financial data can be merged with social media data, so an advisor need not wait to be told about a client’s life events (marriage, divorce, etc.), but can proactively reach out when those events occur

Spending data can be reviewed and parsed by algorithms, so that an advisor is notified when an investor is spending in different patterns than normal

All the data that people are happily feeding into social media can be combined with investment data to predict events and make proactive suggestions. For advisors, this is a very young market, and it is “the Wild West,” with few regulations in place. We can anticipate some great innovation – and some abuses!

Amazonization
Just think how Amazon has changed the shopping experience over the last 10 years. If you are like me, if you are buying anything, you start there. You then look at people’s reviews and compare similar products. (I have not been to a mall in the last 5 years, and I live 5 minutes from the King of Prussia Mall, one of the largest in the country.)

The idea of “rating” an advisor or seeing another person’s review of an advisor has taken a longer time to get going. This is partly because we are a heavily regulated industry where testimonials are not allowed, but partly because it is a lot more complex to rate a human than it is a product!

One example of this is WalletHub. This site gathers publicly disclosed information about advisors and then provides a review section, allowing investors to comment on advisors. As an advisor, you have to have a strong stomach to read some of the reviews. It appears, like products, people either love (5 stars) or thoroughly dislike (1 star) their advisors! It is likely this trend will continue, as more people turn to their “internet friends” for recommendations.

Uberization
For advisors, the epitome of Uberization is obvious – the robo-advisor. The Uber paradigm was to thoroughly disrupt the way people transport themselves by harnessing technology and using the public as the new cab driver.

When the robos started five years ago, advisors feared that they would be disintermediated by pure technology. This has not come to pass, and nearly all the robo-advisors have been either bought or have pivoted to being used directly by advisors.

Even though some of the initial goals of the robo-advisor have not played out, they have had a profound impact on our industry. For example:

User interfaces of software used by advisors in their interactions with clients are held to a much higher standard

Robo-advisors blazed the trail for working with an advisor using technology, either to co-plan a financial plan or use video conferencing to interact remotely

The digital marketing of robos has raised the bar. The days of the advisor newsletter are numbered and the concept of targeted digital marketing in our industry is now here. It is easy to tap into this – log in to a robo site, give it your e-mail and you will receive a stream of very well crafted and focused content. There is a lot to learn from it.

Twitterization
Why has social media been slow to gain traction with advisors? Because the average age of advisors is late 50s and that’s not generally a demographic that uses social media easily (or effectively). To be fair, social media consultants have tried to show a clear return on investment on social media for advisors, but to date, it appears it hasn’t been compelling enough.

But there is a new breed of advisors who have built their brand using social media –they’re young, niche-oriented, national and tech-savvy. One of my favorite stories is Dave Grant. He has built a profitable business providing financial advice to teachers, a market that most advisors would not consider lucrative. A big part of his success is his blog and social media presence, which has become an internet destination for teachers and the media. (To see other financial people who are using social media effectively, check out the twitter handles of: Stefanie O’Connell, Douglas A. Boneparth, Mary Beth Storjohann, Brittney Castro, and Sophia Bera.)

The social-media-savvy advisors tend to focus on the younger clientele who are more receptive to social media, and often use it as their main source of news and information. As this group ages and acquires more wealth, it is inevitable that you will see social media being used much more broadly.

What should advisors do now?

A best practice in blog writing is to close with a call to action. Finish strong, whilst telling your audience what to do with the wise words you have written. My suggestion is to grab a glass of wine (assuming it’s past 5 p.m. somewhere in the world) and pontificate about these trends. They are all going to affect you at some point, so you want to prepare. At the same time, you don’t want to fall into a common advisor trap: chasing the new shiny thing and neglecting the core basics, like meeting with your clients.

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